Source : Business Times – 30 Jun 2009
UK home-loan approvals climbed less than economists forecast last month as the credit squeeze led to the smallest increase in net mortgage lending since records began in 1993.
Banks granted 43,414 loans in May, compared with 43,191 in April, the Bank of England said yesterday in London. Economists predicted 46,000, the median of 22 forecasts in a Bloomberg News survey shows. Net mortgage lending rose by £324 million (S$779 million), about a third of the pace in the previous month.
Residential property held its value for a second month in June after falling for more than a year, Hometrack Ltd said yesterday. Bank of England policymaker Kate Barker said last week the housing market is still ’some way away from normal’ and officials have cautioned that the lending squeeze threatens to delay Britain’s economic recovery.
‘These are disappointing numbers,’ said David Page, an economist at Investec Securities in London. ‘We’ve seen approvals basically stall and lending in absolute levels remains very low. This reminds us that prospects for improvement in the housing market rely on the financial sector.’
The pound fell as much as 0.2 per cent against the dollar after the report, before recovering its losses. The British currency traded at US$1.6499 as at 10.08am in London yesterday.
Gross mortgage lending fell to £10.6 billion in May, the least since 2000, from £10.9 billion in April, the Bank of England said.
The average cost of a home in England and Wales was £155,600 this month, Hometrack said. Prices stopped falling in May on the research group’s measure for the first time in 20 months. From a year earlier, values fell 8.7 per cent in June.
The central bank said in its Financial Stability Report on June 26 that banks have curbed mortgage lending to all but the safest borrowers.
That may hamper a recovery in the economy after it shrank 1.9 per cent in the first quarter, the most since 1979. More mortgage holders are likely to default as unemployment rises, the bank said.
Still, lower interest rates may relieve some of the pressure on homeowners, the UK central bank said last week. Policymakers this month kept the benchmark interest rate at a record low of 0.5 per cent.
Individuals, whose overall debts total £1.5 trillion, added to non-secured borrowings at a faster pace in May.
Net consumer credit rose by £300 million, compared with £200 million in April, as net lending on personal loans and overdrafts increased for the first time in five months.
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